Oil prices moved higher on Tuesday, after new figures showed OPEC members commitment to the output cut agreed late last year.
Latest data from the Organization of the Petroleum Exporting Countries showed the group’s production declined by 890,000 barrels a day in January, to 32.14 million barrels a day. The figures are indicative of a 90 percent compliance level by producers who agreed to an output cut in late 2016.
The rise in oil prices came after the two benchmarks fell 2 percent on Monday. Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam, told Reuters:
“The usually fairly volatile oil price has barely budged for two months, the reason being conflicting dynamics in the market”. However looking ahead van Cleef remained cautious, adding:
“OPEC producers want the market to believe they will stick to the agreed production freeze (cut). But lessons from the past have made the market deeply suspicious”.
OPEC members agreed to a production cut late last year, after months of talks between the countries. Tension between Iran and Saudi Arabia made a deal hard to negotiate, but an agreement to cut oil production – for the first time in eight years – was eventually reached. Non-OPEC member Russia surprised markets by also agreeing to adhere to production cuts.
However, efforts have been slightly outweighed by a growth in production in the US. The latest figures have shown that crude production in the US rose to 8.98 million barrels in the week ended February 3rd, the highest level in nearly a year.
OPEC has predicted global demand to continue to grow to 1.3 million barrels a day this year, which combined with sustained OPEC output cuts should serve to balance supply and demand in the market. China is set to be Asia’s largest market as sales of vehicles continue to rise. OPEC said in a report:
“Stable economic activity in China coupled with a steady stock market were additional elements that caused sales of trucks, buses and passenger cars to increase by close to 14 percent on-year in 2016, with the total number of units sold during the year close to 28 million.”
WTI Crude is currently trading up 0.43 percent at $53.56 a barrel, with Brent Crude up 0.53 percent at $56.12 (1115GMT).